Monday, May 05, 2008

Extra Tax on Oil Companies?

Mrs. Clinton recently said:
Senator Obama wants the consumers to pay the gas taxes this summer; I want the oil companies to pay it out of their excess profits.

I really believe that this difference of opinion over the gas tax is critical. Because I think you've got to have a leader willing to take on the oil companies, starting now. I know that Senator Obama doesn't agree with me. I know that Senator McCain is willing to lift the gas tax but not pay for it. I'm willing to figure out a way to get the gas tax paid this summer out of the record profits of the oil companies. That is the beginning of trying to stand up to the oil companies, which is something we need to do.
The price of crude oil is not determined by Chevron, Exxon, or any one oil company. Energy demand is global. The U.S. oil production is declining. We are forced to compete with other countries for the importation of our increasing demand for oil.

According to Chevron CEO David O'Reilly (WSJ, 1 May 2008), Chevron produces 1.5 million barrels a day, out of 88 million barrels a day globally ... ~2 percent of the total global volume.

American oil companies already pay huge taxes on their profits -- the more profits they make, the more taxes they pay. Mrs. Clinton does not think that is enough. She wants to call out one industry and have a different taxation policy on it because of present economic issues.

So if she takes on the oil companies, how will this decrease the price of oil? It will not. If shows how ignorant she is on economics. The good news is her desired policy (as well as McCain's or Obama's) will never get enacted; Congress would never pass it.

From the Executive Summary of the National Petroleum Council's July 2007 report Facing the Hard Truths about Energy (380 pages; 15 Mb):
According to the The United States and the world face hard truths about the global energy future over the next 25 years:

Coal, oil, and natural gas will remain indispensable to meeting total projected energy demand growth.

The world is not running out of energy resources, but there are accumulating risks to continuing expansion of oil and natural gas production from
the conventional sources relied upon historically. These risks create significant challenges to meeting projected energy demand.

To mitigate these risks, expansion of all economic energy sources will be required, including coal, nuclear, renewables, and unconventional oil and natural gas. Each of these sources faces significant challenges—including safety, environmental, political, or economic hurdles—and imposes infrastructure requirements for development and delivery.

“Energy Independence” should not be confused with strengthening energy security. The concept of energy independence is not realistic in the foreseeable future, whereas U.S. energy security can be enhanced by moderating demand, expanding and diversifying domestic energy supplies, and strengthening global energy trade and investment. There can be no U.S. energy security without global energy security.

A majority of the U.S. energy sector workforce, including skilled scientists and engineers, is eligible to retire within the next decade. The workforce must be replenished and trained.

Policies aimed at curbing CO2 emissions will alter the energy mix, increase energy-related costs, and require reductions in demand growth.
Mrs. Clinton (as well as Obama and to a certain extent, McCain) are pander populists which continue to paint big oil as evil. She even called OPEC a monopoly.

According to the U/S.'s Energy Information Administration (EIA), in Feb 2008, we imported 365,509,000 barrels of oil (down from 418 million in January 2008). Of this, 169,659,000 came from the 12-nation OPEC cartel; 195,850,000 from non-OPEC nations including Canada and Mexico. Hence, despite many Democrats' opinions, the oil industry is not a monopoly.

Oil is one part of the broader energy industry. Energy has a direct impact to our economics, of freedoms, our way of life; but adding a sur-tax onto of the highest tax paying industries in our history is not prudent policy.

1 comment:

hbar said...

Maybe the tax would slightly offset the massive subsidies payed to American oil companies payed by US tax dollars. Odd that we subsidize one of the most profitable businesses in the world, don't you think? Note that most of these subsidies were pushed through by a republican congress, spearheaded by texas congressmen, and Bush threatened vetos of any bills designed reduce these subsidies to an industry with billions in annual profits. I'm not sure undoing that in some manner, even, gasp, taxation, is a bad idea.